* Risk of further instability in West African state (Adds comments from winning candidate, analyst, details)

By Alberto Dabo

BISSAU, May 20 (Reuters) - Former finance minister Jose Mario Vaz won a high-stakes presidential run-off election in Guinea-Bissau meant to draw a line under a 2012 coup, the elections commission said on Tuesday, but the losing candidate rejected the result.

The looming dispute over the outcome of Sunday's vote threatens to stir further unrest in the tiny, chronically unstable West African nation as it seeks to repair frayed relations with its regional and international partners.

Weak state institutions, along with its maze of islands and unpoliced mangrove creeks, have made the former Portuguese colony a paradise for smugglers of Latin American cocaine destined for Europe.

Vaz, the candidate of the dominant African Party for the Independence of Guinea and Cape Verde (PAIGC), took 61.9 percent of votes, according to results announced by elections commission president Augusto Mendes.

"The time has come to turn the page and opt for a policy of inclusion in Guinea-Bissau without religious or tribal discrimination in order to lead a crusade, together, against poverty," Vaz said in a speech late on Tuesday.

He defeated Nuno Gomes Nabiam, an independent candidate who comes from the Balanta ethnic group - the country's largest - and is seen as close to the army. He garnered 38.1 percent of ballots, the commission said.

"I will not accept the result, because the figures collected by my campaign in four of eight regions are different from those announced by the National Electoral Commission," Nabiam told journalists in the capital Bissau.

He was speaking after a meeting with Vaz, the incoming prime minister, the country's current interim president, and General Antonio Indjai, the powerful head of the army.

Later, Nabiam released a statement saying he would seek to have the result annulled through the elections commission and courts over what he said were instances of serious fraud in several regions.

Guinea-Bissau's last election in 2012 was abandoned after soldiers under General Indjai stormed the presidential palace just days before another PAIGC candidate, Carlos Gomes Junior, appeared poised for victory in a scheduled run-off.

Sunday's election was intended to end a transitional period that followed the military takeover.

A RISKY GAME

"Everyone knew the elections would not be the problem. The announcement of results would be the problem," said Elizabete Azevedo-Harman, a research fellow with Chatham House's Africa programme. "I think there is still space for negotiations and mediation. We'll have to see what happens in the coming days...It was always a really risky game."

Both candidates had previously promised to recognise the election's outcome no matter who won. And Guinea-Bissau's military command has also been under pressure not to intervene.

Vaz, in his final political rally before Sunday's polls, called upon the army to remain neutral and respect the election process. The U.S. ambassador to Senegal and Guinea-Bissau, Lewis Lukens, met directly with Indjai earlier this month.

The U.S. Department of Justice accuses Indjai of plotting to traffic cocaine to the United States and sell weapons to Colombian rebels. He was the main target of a U.S. Drug Enforcement Agency sting operation against the country's former navy chief, but he evaded arrest.

An observer mission from the Economic Community of West African States (ECOWAS) said on Monday the voting itself was transparent and credible. European Union monitors said voting on the day had taken place without major incident.

"The electoral process was long, but the first round was crowned a success as was the second round," commission president Mendes said during the announcement of the results.

Turnout for the election was 78.1 percent, down from the nearly 90 percent recorded in last month's first round vote.

Guinea-Bissau's supreme court must now validate the results before they become official. It is expected to do so in the coming days.

Since Guinea-Bissau won independence in 1974, no elected leader has completed a five-year term and analysts say donors and regional powers who have been bankrolling the interim administration are frustrated with the recurrent crises. (Additional reporting and writing by Joe Bavier; Editing by Mark Heinrich)